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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






2. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






3. Exists if a producer can produce a good at lower opportunity cost than all other producers






4. Costs that change with the level of output. If output is zero - so are TVCs.






5. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






6. Exists at the point where the quantity supplied equals the quantity demanded






7. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






8. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






9. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






10. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






11. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






12. The mechanism for combining production resources - with existing technology - into finished goods and services






13. Entry of new firms shifts the cost curves for all firms downward






14. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






15. Occurs when LRAC is constant over a variety of plant sizes






16. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






17. TR = P * Qd






18. Ed = 1






19. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






20. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






21. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






22. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






23. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






24. The ability to set the price above the perfectly competitive level






25. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






26. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






27. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






28. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






29. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






30. Demand for a resource like labor is derived from the demand for the goods produced by the resource






31. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






32. The rational decision maker chooses an action if MB = MC






33. Ed = (%dQd)/(%dP). Ignore negative sign






34. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






35. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






36. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






37. The change in quantity demanded resulting from a change in the price of one good relative to other goods






38. Ed < 1






39. Entry (or exit) of firms does not shift the cost curves of firms in the industry






40. Models where firms are competitive rivals seeking to gain at the expense of their rivals






41. The difference between total revenue and total explicit costs






42. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






43. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






44. The additional benefit received from the consumption of the next unit of a good or service






45. AFC = TFC/Q






46. Exists if a producer can produce more of a good than all other producers






47. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






48. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






49. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






50. Models where firms agree to mutually improve their situation